Bronchopulmonary dysplasia (BPD), the most common form of chronic infant lung disease, represents a significant international humanistic and economic medical problem. Of the approximate one percent of infants born prematurely who develop respiratory distress syndrome (RDS), roughly 20-30 percent will go on to develop a chronic form of lung disease termed BPD. Annual cost for care of such infants approaches $3.0 billion annually in the United States. Although administration of exogenous pulmonary surfactant has unquestionably decreased mortality of very premature infants, it has probably also increased the incidence of BPD by improving survival in this high risk group. The principal investigator's laboratory has previously demonstrated that a key aspect of the acute pathophysiology of BPD involves a pulmonary inflammatory response mediated, at least in part, by a number of potent oxyradical generating systems. The magnitude of this pulmonary inflammatory response quantified as early as 2-4 days of life can predict those infants at highest risk of developing BPD. A logical extension of these observations would utilize anti-inflammatory agents to titrate the inflammatory response and, hence modulate the associated inflammatory host autoinjury. Previous investigations have demonstrated the utility of prenatal steroids in decreasing the incidence and severity of RDS, and of postnatal steroids, administered 2-6 weeks following birth, as an aide to weaning infants from mechanical ventilation. A few investigations have demonstrated a reduction of some pulmonary inflammatory markers concomitant with the administration of intravenous steroids in association with clinical improvement in pulmonary function. Two investigations examined administration of steroids beginning at birth -- this tactic resulted in a decrease in both the incidence and severity of BPD. Nearly all of these investigations have employed intravenous dexamethasone in a tapering dose regimen. Although some side-effects have been noted, for the most part these have been transient and not clinically problematic. The primary hypothesis of this investigation is that inhaled steroids beginning at birth and extended with a tapering dose schedule over the first twelve days of life, decrease the incidence of BPD as assessed at 36 weeks corrected gestational age, and that this clinical effect is mirrored by a reduction in the pulmonary inflammatory response characteristic of acute BPD. Secondary endpoints that will also be examined relative to steroid and placebo groups include days on mechanical ventilation and oxygen, total Neonatal Intensive Care Unit (NICU) days, total NICU care costs and cost of chronic lung disease during the first year of life.